Uber Riots Could Soon Spread to New York and London

The riots in Paris protesting against Uber could be just the start of violence against drivers if the taxi service continues to masquerade as a ‘transportation network company’.

France is famous worldwide for a host of things, including the finest cheeses and wines. However, the French are just as renowned for calling strikes and rioting. In view of this national trait, it was not surprising that the biggest revolt to date against the San Francisco-based Uber ‘transportation network company’ took place a few days ago in Paris and smaller French cities. Other major cities, including London and New York, have already witnessed less extreme protests against Uber.

Enraged by unfair competition and loss of revenue, the French cabbies smashed Uber cars with metal bats and set their tyres alight. They also overturned cars and blocked the traffic to airports and train stations. Some Uber drivers came under assault. US rock star Courtney Love became a victim of the riots after taking an Uber car from Charles de Gaulle Airport. Cabbies shattered the window and took her driver hostage. Love tweeted that she could have been in Baghdad rather than the French capital and had to escape on a motorbike.

The riots were the culmination of months of simmering tension between French cabbies and Uber drivers. Twice in Strasbourg in recent weeks, taxi drivers have posed as Uber customers to lure chauffeurs to remote locations and assault them. “We are going to see repeats of the Parisian protests in a lot more places. In New York, or London, or other major cities with strong taxi cultures, they are likely to respond by turning over Uber cars and blocking traffic,” said Colgate University history Professor Graham Hodges, a former New York taxi driver and author of Taxi! A Cultural History of the New York City Cab Driver.

“French cabbies are right to be angry and to defend their livelihoods. When you have an excessive numbers of cabs on the roads, you get chaos in pricing and performance. It leads to dangerous working conditions and drivers who are so desperate for fares that they are capable of being reckless. If Uber is not regulated properly there’s a danger it will become Darwinian jungle out there and desperate drivers will do anything just to get a ride.”

French taxi drivers pay €100,000 (US$111,000) just to get a licence to operate. However, Uber drivers pay nothing. They use their own cars and hand over a proportion of their earnings to the company. French taxi unions claim that licensed drivers have lost between 30% and 40% of their income over the past two years because of the growth of UberPOP, a car-sharing service offered by Uber, which brings together customers and private drivers at prices lower than those charged by both traditional taxi firms or other Uber services. UberPOP has been illegal in France since January, but the law has proved difficult to enforce. Uber says it has a million users in France, including 250,000 for UberPOP.

The anger about Uber connects with wider controversies about the nature of the so-called ‘sharing economy’. Advocates argue that modern technology can bring communities together and create a flexible job market. They see the taxi drivers’ anger as a repeat of the Luddite protests of 1811, when textile workers smashed up labour-saving looms and frames. However, voices that are more critical point out that the biggest ‘sharing economy’ companies are based in California and owned by venture capitalists. Their principal concern is to maximise profits. This is certainly true of Uber, which has a market valuation of US$40 billion, but it is just as true of the Airbnb, which has been valued at US$20 billion.

These doubting voices say that the proselytisers for the sharing economy use rhetoric about ‘community’ as a smokescreen for their unbridled free-market ideology. Professor Hodges says the term ‘sharing economy’ is a complete misnomer when applied to a company like Uber. “It’s a new form of exploitation of the labourer. Workers are being sent back to live in a 19th century industrial world before unions fought for better conditions. Rather than offering good incomes, companies like Uber are creating a completely new servant class.

“Walmart pioneered this model by making employees part of the management, which is a total nonsense. Nevertheless, it allowed them to skirt around labour laws and skip providing job security, or benefits. Uber is applying the same model to cab driving. They have made all drivers independent contractors. In many places, the drivers are not properly insured. It is nice to get into a car with free cleanex and bottled water, but if you have an accident, there might be no one willing to pay out. There are now court cases about this in the US.”

The danger for the taxi market, Professor Hodges says, is that no one controls Uber. “The company basically controls itself. It controls prices, the kinds of automobiles allowed and the fees given to drivers. Everything is within Uber’s hands as opposed to the municipal governments, which at least have some obligations to the public.

“What this does is break the social contract with the city. For years, taxi drivers have eked out a petit bourgeois existence and the city has helped them by setting limits to the number of drivers and the size of fares. In return for obeying the rules, drivers received protection from the excessive competition of people not qualified and are undercutting their livelihoods. Uber is threatening this model.”

There have been some absurd consequences of Uber’s independence from tariff-setting regulators. The company’s practice of fare gauging means that when its cars are much in demand, the cost of a ride rises. An extreme example occurred last year, in downtown Sydney, where Uber’s fares rose to US$100 for local residents who were desperate to escape from an armed gunman. “The police cordoned off an area around a cafe where he was holding staff and customers hostage. So many of the locals wanted to escape that Uber’s pricing algorithm jacked up fares by four times the normal rate,” said Professor Hodges.

Too many cities are culpable for allowing Uber to infiltrate the market, Hodges says. However, Uber is not the only problem for today’s taxi drivers. In New York, the local authorities increased the price of a new medallion to US$1.3 million in 2013. It has fallen back to around US$840,000, but that is still out of reach for most drivers. “The prices are obscene,” said Professor Hodge. “Cities are printing money by selling the medallions at inflated prices to bolster their finances. Individual drivers cannot afford that so brokers often manage the medallions and take a percentage of the income. As with IUber, the driver bears all the costs and does all the labour. Taxi driving was never an ideal occupation but we’ve seen a further proletarianisation of the cab drivers, which Uber is making worse.”

Anger at Uber’s freedom from regulation has provoked reactions all over the world. In India, Delhi banned Uber in December after a woman said one of its drivers raped her. In China, taxi drivers have protested against unfair competition and police have raided Uber offices in Chengdu. In Spain, a judge has ordered Uber to stop operating in the country altogether.

However, the picture is complex because regulators are responding in so many different ways. Some cities in the US have welcomed Uber. In San Antonio, for example, the municipality has encouraged Uber drivers to come in, whereas other US cities have been more proactive in regulating it. In Kansas, lawmakers voted in legislation to force Uber to carry out background checks on drivers and made it a requirement to obtain extra car insurance. Most significantly, California’s Labour Commission decided Uber drivers were employees, rather than contractors. This important distinction could impose significant costs and responsibilities on drivers in California and other US states may follow suit.

Hodges says the decision in California is a step in the right direction. “Uber should operate as a taxi company and not pretend to be something else,” he said. “Its nonsense to claim it is a transportation platform. They have to accept responsibility for being a corporate citizen rather than taking the profits and thumbing their noses at everybody.”

Getting municipalities on board, however, is not always straightforward. “One problem is that it’s not hard to bribe politicians these days, especially if they are free market zealots and think Uber is a good thing. The business of taxi driving has needed reform for a while, but it needs to go in the other way towards greater controls, rather than deregulation and cab drivers being forced to accept what Uber gives them.”

Professor at Columbia University. Recipient of the Nobel Memorial Prize in Economic Sciences in 2001 & the John Bates Clark Medal in 1979. Author of "Freefall: America, Free Markets", "The Sinking of the World Economy", "Globalisation and its Discontents" & "Making Globalisation Work".

Dr Steinbock is an internationally recognized expert of the multipolar world. He focuses on international business, international relations, investment and risk among all major advanced economies and large emerging economies. In addition to advisory activities (www.differencegroup.net), he is affiliated with India China and America Institute (USA), Shanghai Institutes for International Studies (China) and EU Center (Singapore). For more, please see http://www.differencegroup.net/. Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore).

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